The American procurement industry is riddled with an increasing number of challenges. So much so, that the industry, on the whole, has been in a state of constant crisis. According to a study by Capgemini, a ‘reduction in transportation costs’ has been listed as one of the leading concerns in the procurement market. While the need for greater technological innovations would always be the most challenging concern, the crisis of the American procurement market is dominated by some other challenges as well:
Rising Fuel Costs:
One of the highest factors contributing to freight transportation cost is the rising levels of fuel prices. The higher fuel surcharges are more likely to increase transportation costs for shippers based in the US as compared to other countries. In addition to this, when it comes to road transport, the rising diesel prices are further escalating the charges which are added to freight rates. This is rapidly reversing the two-year long trend that had affected the earnings and revenues generated by truckers with the plummeting of fuel prices.
Raised Customer Expectations:
In an age of same day delivery perfected by e-commerce giants like Amazon, customers now expect complete transparency into where their delivery package is at all times. When the location of a delivery package can be as easily obtained as connecting to a social network, customer expectations from freight transport have significantly increased. Conversely, their willingness to pay for fast shipping has also decreased with just 64% of consumers being willing to pay extra charges for any form of shipping that requires less than two days.
The change in job requirements of the procurement industry has also caused a change in its talent landscape. According to a research brief by DHL, the procurement industry is experiencing a severe shortage of talent in which the demand for professionals is exceeding the supply by a ratio of six to one. In addition to this, approximately 25 to 33% of the current procurement workforce is either at or beyond the age of retirement. In a nutshell, there are not enough qualified professionals to fill the talent gaps. It is interesting to note that the shortage is not only due to high demand, but its also due to a difficulty in finding candidates who fit the quickly changing job requirements.
The high fuel prices have also given way to a higher credit crisis and rising inflation demands that have taken a toll on the US economy. As a result, the procurement industry is being slowed down by declining demand, increased compliance regulations, and an increase in costly centers.
Apart from these barriers, other factors like the business improvement, supply chain management, retaining labor, market expansion, vendor management, and technology implementation also affect the procurement industry:
What Can the Government Do?
The recent crisis faced by the procurement industry can be alleviated if the government takes necessary countermeasures. Promotion of automation and modernization in the procurement industry can go a long way in simplifying freight transportation. It is time for government agencies to become proactive and bring about automation in all the stages of the procurement process. Automation is necessary to make processes more efficient as it frees up resources so that they can be engaged with more demanding tasks.
To address the rising consumer demands, agencies could start sharing services among other government agencies to avoid redundancies while also aligning with the industry’s best practices. The resulting efficiency would not only save time and money, but would also improve agility, spark innovation, and reduce redundant processes.
The next step that government can adopt is to take measures that simplify the procurement process. Acquisition officers could start with placing a greater emphasis on the purchase of holistic solutions that directly address the needs of the industry. Instead of adopting isolated technologies that necessarily might not work well together, agencies need to work on coming up with optimized solutions that are designed to tackle the structural problems.
How Would this Impact the Freight Industry?
Adaptation of automation in procurement would contribute towards increasing the agility and speed of processes in the freight industry. For instance, faster purchasing processes would mean that freight organizations could keep up with growing consumer demands while also being competitive. Efficiency would also encourage the procurement industry to actively adopt technologies that continuously add value to the business operations.
The resultant increase in the efficiency of the procurement processes would also help in improving the general perception of the freight industry in the minds of stakeholders. As the global economy continues to make advances, strategic investments would dominate most industries. In this regard, getting a head start in the race for best investment options would give the freight industry an excellent benefit over others. Further, the conventional stereotypical image of procurement professionals as number crunchers that usually acted as a deterrent when it came to securing investments would no longer be a problem. The cross-industry collaboration brought about by greater adoption of the procurement industry-specific processes is now empowering freight professionals not just in the US, but all over the world.
Despite the rapid changes in the processes, the core mission of procurement is still the same: reduction of costs through the procurement of best quality and price for services and goods. While the addition of other responsibilities has led the industry towards crisis, the adoption of automation and agility have the potential of giving the industry the necessary push that it needs.